Usually, biopharma stocks are inclined to surge or crash based on regulatory decisions or the outcome of clinical trials. More unusual is for shares of one to crater due to disappointing quarterly results, but that’s the price of already having a treatment available on the market that unfortunately is underperforming.
Which brings us to Aurinia Pharmaceuticals (AUPH). The Street was not pleased when the company reported its first-quarter earnings last week, after the sales of Lupkynis, Arurinia’s treatment for autoimmune kidney disease lupus nephritis (LN), came in below expectations. Shares dropped by 18% in the subsequent session, and are now trading at 52-week lows.
Sales in the quarter hit $0.9 million, far below the consensus estimate of $3 million. However, Leerink analyst Joseph Schwartz thinks there are mitigating circumstances for the underperformance.
“As we recently outlined, we tapered our near-term sales projections, given COVID-related headwinds and delays in prescription fulfillment dynamics. Further, as Lupkynis was only approved on January 22nd, the sales reported for 1Q21 only represent approx. 8 weeks of commercialization,” Schwartz said. “While sales missed both our estimates and consensus, we believe the $0.9M figure still represents a respectable first partial quarter of sales, given the difficulty of launching a new drug during an ongoing pandemic.”
Although management had planned for pandemic-related headwinds, during the last three months, Covid-19 has been particularly disruptive for LN patients. A recent World Lupus Federation report showed that 50% of those surveyed noted the increased difficulty in getting access to “at least one aspect of lupus healthcare.”
However, Schwartz anticipates the issue to subside and expects Aurinia’s 150-person sales team will be out and about more often as the national rollout of vaccines progresses.
The company said it has already engaged with over 6,000 rheumatologists and nephrologists, which has resulted in 257 patient start forms, and after the drug’s first two months on the market, 40% of those patients were already getting treated.
The early progress is “encouraging,” says the analyst, who notes that management has said the areas where there are less Covid restrictions are those with the most interactions and prescription activity. As such, Schwartz thinks sales of $66.5 million are “attainable” in FY21.
Schwartz also thinks there are big gains in store for AUPH stock. He puts a $28 target price on the shares, indicating one-year upside of 180%. Needless to say, Schwartz rates AUPH an Outperform (i.e. Buy). (To watch Schwartz’ track record, click here)
The Street’s average price target is only a fraction beneath Schwartz’s, and at $27.40, suggests gains of 174% are on the 12-month horizon. The analysts’ confidence in Aurinia is confirmed by a Strong Buy consensus rating, based on a unanimous 5 Buys. (See AUPH stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
